Wednesday, May 16, 2012

Vancouver Housing Bubble Cracking?

Here is the price of an average house in Canada

Vancouver's market has been unaffordable for years and seems now to be popping:

Mayur Arora is seeing something few would have expected in Vancouver’s real estate market – people walking away from deposits on houses, convinced prices will fall further.
“It happened twice in the last month. One [deposit] was $75,000 and one was a $20,000 deposit, the guys just walked away from it,” said Mr. Arora, who runs in Surrey, B.C. “They are going to wait it out. So they lost $75,000 and $20,000, but if the market comes down $150,000 on a $1.5-million house, that’s not uncommon.”


  1. Bubbles are hard to see and even harder to predict when they will burst. No matter how high the housing prices will rise there is always an analyst who is arguing that this time things will end up differently. I'm quite sure we are to witness a housing bubble in Canada in the upcoming year or so.

    Toronto is becoming the next white collar city as London or New York and adjusting the prices might seem reasonable. Looking at the situation in Canada as a whole, the prices rose only 0.9 (April 2011 - April 2012) which might seem a reasonable and understandable rise.

    However, house prices haven't been matched by increases in growth in GDP, inflation, population growth or the rental indexes produced by CMHC. The ratio house price:rent (similar ratio is used to identify valuation risks in stock) is now higher in Canada than it is in any other developed country.

    Moreover, average house prices are now moving around the level of 12 times personal income - much higher than any historical average value. This ratio reached 9.7 times the income in the last housing bubble in the late 80s.

    Canada has been often viewed as a safe place within the unpredictable world. We survived the economic crisis in 2008, we seem to be doing just fine now, when the EU is about to collapse but to keep this situation would be an incredibly hard job to do.

  2. The affordability of houses and other costs in Vancouver is crazy. I don't own a home, I rent. And there is no way I'm going to buy a home in Vancouver area when I know its true value is much less. With the help of foreign money, they have done nothing but inflate the housing market! and made it difficult for the average person to buy a home. You know the Average Salary is $50k in Greater Vancouver Area. How can you afford a home that costs $600,000 plus?? and with the high cost of Gas, Food & Taxes, its unreal! I'm surprised the nice west coasters are taking it so quietly not making any noise about it. But wait until the Interest rates go up, do you think people will starve themselves, stop driving their cars just to pay for their mortgage and other line of credit that they've taken out against their home. I highly doubt it, this is where the big bubble is going to come. Vancouver has the prices of New York property with Salary of Small time city an unrealistic value. A Real Estate Agent friend told me that housing has started to slow down now since after the Olympics, but they cannot say that publicly because they want to scare future clients. And just as the above article indicated people walking away from security deposits is very telling. I say GL to anyone out there living by the thread, with high inflation, interest rates will increase like it or not.